Chic boutique not the right fit

After 2 years, New York & Company to exit Boston-built JasmineSola

By Nicole C. Wong, Globe Staff | October 19, 2007

Come early next year, well-heeled Bostonian women could lose a fashion icon.

JasmineSola, a Boston-built women's clothing boutique that has catered to affluent, fashion-forward customers for more than 30 years, has turned out to be an ill-fitting acquisition for New York & Company Inc.

Yesterday, the trendy yet cost-conscious retailer with 560 stores nationwide announced it would end its tumultuous two-year ownership, saying it "has decided to exit the 23-store JasmineSola chain" by Feb. 3 and "focus future investments on higher-return opportunities within its New York & Company brand."

The announcement follows a series of disappointments for the chic homegrown chain, which has been losing money this year, after New York & Company fired, sued, and replaced JasmineSola's founder in the summer of 2006.

It's unclear whether JasmineSola will be sold or completely shutdown.

A New York & Company spokeswoman didn't immediately answer questions about the decision. But in yesterday's news release, the company said it's "exploring opportunities" to convert its existing JasmineSola locations in Massachusetts, Connecticut, Rhode Island, New York, New Jersey, and Florida to its New York & Company concept and to redeploy some employees.

That doesn't sit well with some shoppers. If any of the nine Massachusetts locations are converted, don't expect to see Northeastern University student Amanda Bogins shopping at any of them.

They may have more fashionable shoes and sweaters, but JasmineSola has dampened New York & Company's profits. The boutique lost 3 cents per share in the second quarter while New York & Company earned 6 cents a share overall. For the full year, JasmineSola is expected to lose 13 to 15 cents per share.

"You can see the ripple effect," said Samantha Panella, a financial analyst at Raymond James who follows the company. Even though JasmineSola's two dozen stores were dwarfed by the number of New York & Company's branded outlets, the boutique "has been a distraction to management and a drag on their earnings."

If this does mark the final chapter, it will be an abrupt ending for the chain created in 1970 by Luciano Manganella. He opened his first store in Harvard Square and filled it with custom-made designs.

The retailer that was originally known as Jasmine - an allusion to hippie-era flower children - flourished over the next 35 years and outperformed many national competitors, raking in an average of $800 in sales per square foot, according to mall operators. By 2004, its stores at Boston's Prudential Center mall and Newton's Mall at Chestnut Hill generated sales in excess of $1,400 per square foot.

That caught the eye of New York & Company in 2005, which was searching for a way to cater to upscale women who looked for designer labels like Miss Sixty. That summer it acquired the 14-store JasmineSola chain, declaring it "a great strategic fit for our company" as the boutique catered to women ages 15 to 45 with sought-after brands and represented "a growing segment in the retail landscape."

Manganella stayed on board, leading JasmineSola through the anticipated nationwide rollout.

But in summer 2006, New York & Company fired and sued Manganella and replaced him with someone from its accessories business.

Earlier this year, an arbitration panel awarded Manganella $2 million in lawyers' fees and costs and more than $300,000 in interest. Manganella could not be reached for comment yesterday.

Investors cheered yesterday's news, pushing New York & Company's stock price to $6.29, up 37 cents, or 6.25 percent. The shares had set 52-week record lows several days at the end of September.

Globe correspondent Rebecca Fitzgerald contributed to this report. Nicole C. Wong can be reached at nwong@globe.com.